Statements regarding the cost preferred stock

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Reference no: EM132029154

1. Which of the following statements regarding the cost preferred stock is true?

a. Is typically found by solving for an annuity’s discount rate

B. It is typically found by solving for an annuity Due’s discount rate

C. It is found similarly to a perpetuity’s discount rate but with irregular spacing of the dividends

D. Is typically found by solving for a perpetuity’s discount rate

2. Mojito Mint company has a debt-equity ratio of .35. The required return on the company's unlevered equity is 12.8 percent, and the pretax cost of the firm's debt is 6.5 percent. Sales revenue for the company is expected to remain stable indefinitely at the last year's level of $17,500,000. Variable costs amount to 60 percent of sales. The tax rate is 40 percent, and the company distributes all its earnings as dividends at the end of each year.

What's the firm’s weighted average cost of capital?

14.12%

11.47%

13.25%

17.18%

Reference no: EM132029154

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